Extending our classroom to the world!

Group 1

One important thing to take away from Operations Management (OM) is how relevant it is in all branches of business. Developing an understanding for operations management can be the key to solving many problems in a business regardless of your field. This lesson became apparent to me when considering lectures from both my management and marketing course. Marketing concerns itself with the 4 P’s or price, product, promotion, and place. What I want to focus on in this blog is place, which coincidently supply-chain management is one of the OM strategic decisions and a major way companies can reduce cost. Anheuser-Busch’s Budweiser has implemented a supply chain that is worth taking a closer look at.

First, it is important to note that all alcohol producers must adhere to the Three-Tier System, which simply states the distribution of alcohol must include an independent intermediary between producers and retailers to eliminate unfair practices by producers. In other words, “the distributor is not allowed to purchase shelf space or exclusivity, furnish equipment like draft coolers, offer loans or create a feeling of obligation, or offer discriminatory promotional pricing” (Spiess). What this means for alcohol producers that their supply-chain channel is already determined for them; they do not have the option of choosing between a direct or indirect channel structure. Budweiser must go through a wholesaler/distributor to reach the retailer.

Since Budweiser must have an indirect channel structure paying for distributors will impact their costs. Thus, finding ways to lower the cost becomes the next step. When dealing with the three-tier system, Budweiser must make strategic supply-chain management decisions that will benefit their business. Looking to OM becomes a crucial step. Thus, some brewers such as Anheuser-Busch and Miller have found ways to go around the requirement of an independent distributor without actually breaking the rule. Due to their wealth and success, Anheuser-Busch essentially has ownership of their distributors without actually owning the distribution channel. For example, “In 1977, Anheuser-Busch had their distributors sign an “exclusivity incentive program” which didn’t require the distributor carry only A-B products, but gave huge benefits if they did drop all competitors” (Spiess). Through incentive programs such as these, Budweiser is able to implement a vertical forward integration channel, in which they essentially control their wholesalers.

Of course problems struck when independent distributors found out that “Anheuser-Busch has more than 500 distributors across the country…nearly all of which are independent companies with an exclusive contract to sell A-B beer in a certain geographical area” (Logan) and started to push a bill through the state legislature to stop these practices. They are arguing that Anheuser-Busch is gaining profits by saving on what they normally would have had to pay the distributor (Logan). Wholesalers believe these producers are exploiting the system meant to protect distributor rights. On the other hand, Anheuser-Busch argues as a smart supply-chain management decision, it makes good business sense to hire wholesalers who are loyal to the Budweiser brand rather than those who also carry their competition. Thus, Anheuser-Busch minimizes costs while distributors are guaranteed its business.

While this is a great way for Anheuser-Busch to minimize cost, is it fair to the wholesaler who will not sign the incentive agreement and is then losing this revenue?

Should alcohol manufacturers such as Budweiser be able to own their own distributors as part of their supply chain management?

The fashion world is dynamic and constantly changing industry. What is in today may not be in tomorrow. What is a fashion faux pau last season could be the new hottest thing in the coming season. As a result, some items and trends might be outdated before they even make it to the shelf because it can take so long bring an item or trend to market. This is what makes Zara different from its competitors. Zara can take something from its design phase to mass distribution to its thousands of stores in as little as four to five weeks. This crazy fast turnaround time is one of the keys to Zara’s success and has made the founder the 3rd richest man in the world.

Zara starts by understanding, not predicting, fashion trends in order to deliver what the customer wants instead of trying to be the innovators. After understanding the trends and what their customers want, they imitate the products of their competitors, send the designs to their many manufacturing facilities located primarily in Europe but also in Asia, and deliver the finished products to their stores twice a week. In addition, Zara designs apparel in five waves each season to avoid overlap in the changing seasons. Zara depends on information form it thousands of stores to determine which items customers’ love and which ones flopped. The ones that remain hot, Zara will continue to produce for a while until they fallout of favor while they cease production almost immediately of items consumers are not picking up on. This line of communication between the stores and HQ ensures that the customers decided demand and supply.

At their core, Zara was built around this concept of giving the customer what they want and this integrated model and line of communication between the stores and the design team is essential to maintain this. If there is a correction that needs to be made to an item in production, the stores communicate this to HQ and a corrected item is on the shelves in two weeks. This is done by what Zara calls proximity sourcing. The production centers for highly volatile fashion items like skirts and blouses are in Spain and other parts of Europe in order to keep up with the changes in fashion while production for other items like t-shirts occurs in Asia since changes do not occur as rapidly. These aspects of Zara make it one of the most unique fashion retailers and one of the best positioned ones to answer customers needs in an constantly changing environment.

Do you know of a company that has such a fast turnaround? If not, can you think of a company that should follow Zara’s steps? What do you think of Zara’s strategies?

My friend Elena Miller is a very talented cake baker. She started baking cakes in high school as a hobby and people saw potential in her and encouraged her to take it serious. So she decided to work for a bakery, and in less than a year she became very well-known in Chicago area and had many other offers. A couple years after graduating high school she moved to Austin Texas and opened her shop there. She currently makes customized cakes; she pretty much can make anything from realistic looking pets, car models, favorite alcoholic drink, and castles anything you can think of upon request.

A very hard working woman she works about 70 hours per week and has a staff of three other talented bakers all this is excluding client meetings and other industry related obligations. I decided to observe her operations the flow structure of the process used to make, and deliver of her cakes in timely manner, facility lay out and other work methods. Broadly characterized her operation can be classified as job shop. A job shop process uses general purpose resources and is highly flexible.

Layout: In the job shop, similar equipment or functions are grouped together. In her shop the rack oven, deck oven and proofer are at the entrance of the kitchen while the cooler and other dry martial inventory storage is at the other opposite end. Working “clean” area is in the middle with different size tables, slicers, and molders.

Employees: In a job shop employees are typically highly skilled craft employees who can operate several different classes of machinery. These workers are paid higher wages for their skill levels. Due to their high skill level, job shop employees need less supervision. Everyone at the shop is very responsible and accountable for each task. All of them know how to operate the heavy duty ovens. The key activity in a job shop is processing information.

Information: Information is the most critical aspect of a job shop. Information is needed to quote a price, bid on a job, route an order through the shop, and specify the exact work to be done she gets lots of customer’s word of mouth has tremendously helped her business. Here is the basic procedure, clients come in and order their specific cake. Then she gives them a quote after that she creates a blue print. This is where she allocates the cost of production i.e labor and raw material.

My final analysis in correspondence with process strategy is that in her operation flexibility is high as they make very detailed and highly customized cakes that take lots of hours. Volume is low labor content and skill are very high and finally capital investment is low.

When flying on an airplane don’t you wish that both sides of the plane were windows? I’m the person that’s always trying to sit by the window so I can be able to see what’s going on throughout the flight. I’ve always wondered what it would look like if the entire plane was a window and if that is something that could be possible. I was very interested when I came across an article that described a new technology that would allow passengers to have a panoramic view when traveling.

In the article “Windowless plane would let passengers see world around them” it describes how a UK based company Centre for Process Innovation (CPI) has come up with a new technology that will appeal to both the customer and airplane companies. The idea is to replace the siding of the plane with a high definition screen that will make most of the plane translucent during flight. How it will work is it will have cameras on the outside of the plane that will project everything it picks up in real time on the interior high definition screens. This will give you a panoramic view throughout the duration of the flight. The passenger will also have the option to change their individual screen to any view the plane provides. This will solve the problem of trying to look through the small window across the aisle to get a glimpse of something you were hoping to see.

In class we talked about several things airplanes have done to get more passengers into each plane and raise their profits. This idea of changing the siding of the planes will do just that. These new screens are thinner, stronger and much lighter than what is already in place. By having thinner walls it will provide more room in the cabin to add more seats or to give the passengers more room when flying. Also this will make the plane lighter which will cut back on costs and could lower ticket prices for the consumers. The company has calculated that for every percent of weight change there is a .75 percent savings in fuel costs. With even the slightest savings the customer and companies will see significant price changes.

This very innovative design seems like something very practical for both the airplane companies and the consumers. Even though it may seem like something that will happen far into the future the UPI Company believes it could have a fleet of these planes within the next ten years. I’m very interested to see how this technology develops and if this design ever becomes a reality.

Recently in class we talked about operations strategy in a global environment as well as the challenges in Operations management, we touched on some of the reason why companies decide move their headquarters elsewhere and the advantage that globalization brings. One slide from the PowerPoint presentation jump out at me as I was contemplating on what to write for my second blog post. The slide was about the cultural and ethical issues that these companies experience when globalizing, and immediately one company came to mind, Nordstrom. From research that I have done, Nordstrom’s focus is to provide “fair” treatment wherever they do business. Nordstrom expects his business suppliers to comply with the applicable laws and regulations of the United States as well as having set up an internal risk department that conducts annual risk assessments through internal audits. These risk assessments help to identify areas of potential risk in Nordstrom supply chain. This assessment includes monitoring for human trafficking and slavery risk within the supply chain.

Nordstrom is one of those companies that work through an e global commerce provider, border free, that allows them to offer international shopping. Through this global commerce provider, Nordstrom customers are allowed to convert from American dollars to any local currency they also show the customer all the duties and taxes that need to be paid by that customer, they comply with customs; making sure that packages are Customs-friendly and meet all the requirements both in the U.S. and around the world, and they are aware of product restrictions. This e global commerce provider facilitates Nordstrom’s communication with the rest of the world, it facilitates business transactions and it provides a good understanding of Nordstrom product to other people who are not familiar with their products.

This global expansion has been very successful for Nordstrom. In 2012, it increased e-commerce sales 42.4% to $1.3 billion from $913.0 million, and they are expecting in growing web sales to 6 billion in 2020. E-commerce sales account for part of 25% of total revenues for Nordstrom.

Today, Nordstrom continue to increase with web sales growth of 33% in their first quarter. According to Mike Koppel Nordstrom executive vice president and chief financial officer, they plan to invest 3.9 billion in capital over the next five years, the main focus being on serving more customers through store and online growth.

Nordstrom has also taken one of the new challenges in operations management, which is sustainability. People today are more concern with “protecting the planet” as well as recycling. Boxes given to customers when there is a purchase are made from 100% recycled fiber, saving 400 tons of paper annually. Bags are made of 80 percent recycled content and are recyclable, catalogs too, comes from certified sustainable managed forest and it also comes from paper already used. Their restaurants are local, healthy and ecofriendly.

http://shop.nordstrom.com/c/nordstrom-cares

My questions is:

Do you think that the operations management challenges such as sustainability is increasing Nordstrom e-commerce?

Hiring good project managers is critical to any business’ success, yet so many companies are going about hiring them in all the wrong ways. Russell Harley provides us with five simple, cost-effective ways to ensure you are hiring the right project manager for your business. Picking the right or wrong applicant for your company’s needs can make or break your company. If hirers take these five simple measures- they will be far more likely to hire a great project manager that will better the company.

Stop Using Generic Job Descriptions

It seems as though every job description/qualifications section for a project manager job application is a broad template that could be applied to just about any position or company. “Must have good communication skills,” “Be a self-starter,” and “Work well with teams” are all examples of what you will see in just about every job description for a project manager position. In order to find the right person for the position- these need to be more specific to what the company values and expects from the candidate. Such broad language will invite hoards of applications into your inbox, turning your hiring process into a “needle in a haystack” type of task. You are more likely to get responses from project managers that are a good fit for your company when you clearly specify what is expected of the person. Not only will these generic job descriptions hinder your company’s hiring process, but is also not fair for the applicant to come into a position that they are not prepared/qualified for.

Decide Exactly What You Need

Doing this is really just another way to narrow down your pool of applicants. Prepare an in-depth analysis of what aspects of your company struggles with and needs improvement. For example, if your company is struggling with the adoption of a new type of software, ask for knowledge and experience using that specific type of software. This will cut down on training time/costs and help your company operate more efficiently.

Critical Projects Need Dedicated Project Managers

With cost-cutting being a reoccurring measure taken by almost all companies- it is important to get the most bang for your buck when hiring a project manager. Sure, the overseeing and delegation aspect of project management is very important, but you also want a project manager that is willing help out with the workload. Having a project manager that is willing to get his hands dirty will earn the respect of team members and increase efficiency. Make sure to find a project manager that doesn’t want to just sit a desk all day; find one that is willing to do whatever it takes get a project done the most efficient way possible.

If You Need a Specific Methodology Used, Say So

Some project managers favor certain methods for getting a project done and not all of them will work for what you need done. Make sure you know what methods of management your employees respond best to and that the project manager you hire is familiar and experienced with those methods. Using a methodology that your employees do not respond well too can cause a project to fail quicker than almost anything.

Eliminate the Essay Questions

It is very common for companies to ask for written responses from job candidates answering questions like “What makes you a good leader?” Nine times out of ten you are going to get a fluffed up response with little merit. Going through all of these responses can be a lengthy, time-consuming process. Look to their experience and references- that should answer just about any essay question you are thinking about putting on an application.

Do you agree/disagree with Harley’s suggested practices in the project manager hiring process?

This article goes over a study done by Linda Hill, a Harvard Business School Professor. This study is about those who become managers for the first time, and Linda writes about the 5 common myths and misperceptions that lead to mistakes in their early days. Some of the mistakes that she observed are as follows:

Myth 1: Managers wield significant authority

Linda discovered that many new managers reported that they were shocked by how constrained they feel. New managers have to deal with a web of relationships, with their bosses, subordinates, peers, people inside and outside of the organization. All of whom who have relentless and conflicting demands given to them. Linda suggests that until new managers give up the myth that they have such authority and need to realize that they need to negotiate their way through these people and their demands, they will end up frustrated and facing failure.

Myth 2: Authority flows from the managers position

Linda writes that many managers believe that whatever authority they posses comes from their title. Good managers learn over time that they must earn that title of authority from their subordinates through respect and trust. They must show their character, that they are capable of getting things done, and that they are competent if they want their subordinates to follow their lead.

Myth 3:Managers must control their direct reports

New managers often look for compliance to orders from their subordinates, they must keep in mind that compliance is not the same as commitment. Linda points out that if subordinates do not have commitment, they will not show initiative. And if subordinates do not show initiative, it will be difficult for managers to delegate effectively. Linda suggest that managers nurture a strong commitment to shared goals, rather than following whatever the manager says.

Myth 4: Managers must focus on forgoing good individual relationships

Linda says that managers must focus on on building a team, not on friendships. When managers focus on individual relationships, they lose the fundamental aspect of effective leadership. By shaping the team’s culture of norms and values, managers can unlock the diverse talents that make up the team.

Myth 5: The manager’s job is to ensure things run smoothly

Linda writes that if a manager is only trying to make sure that the operations run smoothly then they are making a big mistake. New managers also need to understand that they are responsible for making changes that will enhance their group’s performance. Many new managers find it challenging because they find themselves having to challenge organizational processes or structures that exist above and beyond their area of formal authority. Linda writes, ‘only when they understand this part of the job will they begin to address seriously their leadership responsibilities.’

I personally found this article helpful in understanding my new manager and I do intend on bringing these points to our next managers meeting to help improve the store’s operations and the effectiveness and commitment of our staff.

Now my question here is, have you ever experienced a manager with that conducted business with these myths? How was that experience? Did you find yourself questioning their ability as an effective manager or did you think their style of management produced positive outcomes for your organization?

We recently learned about the different process strategies. They range from process focus, with a low level of output and a high variety of products, to product focus, with a high level of output and standardized products. In between the two is mass customization, characterized as “the rapid low-cost production of goods and services to satisfy increasingly unique customer desires”. It is the perfect combination of product and process focuses and although it is difficult to achieve it has a great payoff if you do.

We have seen successful example of mass customization with Dell computers. Dell allowed the customer to go into their website and create from scratch a system that met their specific and individualized needs. It was a hit for a while, until Apple began to dominate the electronics market. But the fact that people latched onto this idea shows that as consumers we know what we want and how we want it. So why don’t we do this with every product? Larger products? Namely cars.

Nissan Skyline R33 w/ Heat-Sensitive, Color-Changing Paint

It was a surprise to me, possibly because I only have a basic knowledge of cars, that you can in fact customize a car to your exact specification and that wasn’t just a concept limited to the very very wealthy and MTV’s Pimp My Ride. Beyond choosing black, white, grey, or red, and whether you want a drop top or not there are so many ways to customize a vehicle. There’s heat activated color changing paint and cars that have up to 1,750 horse power. Amazing.

So, ignoring basic cost restrictions, why are we all out here with the same basic variation of the same car? Why is there no website like Dell’s where someone can go and build their car from scratch meeting their specifications and limited only by their imaginations?

While it’s fun to think about there are currently obvious restrictions to this idea, and major differences between the production of a computer and a car. My question is could this be a future possibility? We saw the efficiency of a Tessla production center that required less workers and allowed for a greater accuracy and output of production. Could we take this model and expand on it to the point where at the click of a button we have a fully customize product ready for delivery to our nearest dealership. Would people even participate in something like this? We saw the success of Dell but we also saw its decline when something else was introduced to the market. Apple computers sold better but have less opportunities to be individualized, but people don’t seem to mind. What would be the drawbacks in mass customization (and there are probably a lot) of motor vehicles?

What if you were told that while you shopped, you were being watched not only by store cameras to catch theft, but also for data collection? That somewhere, your actions were being examined and discussed? How would you react to that? Luckily, many of you did not know of this creepy, yet accurate forecasting method until now.

Although tracking customers have been around for many years, security companies have finally broke into the market, advancing the cameras abilities by drawing “heat maps” to assess buying behavior, have better strategic capacity planning,and being able to guess shoppers’ sex and age. According to market-research firm IDC, $1.3 billion will be spent on analytics software this year to make sense of the data collected, and potentially increasing forecasting accuracy.

Gordmans, a department chain store that can be found in places like Champaign, Naperville, and Rockford has used cameras as their technology tracking source. In one of their stores, 35 cameras were placed throughout the store and used to track the movement of 29,000 shoppers over a three week span. This footage was then turned into heat maps in order to show which popular departments of the stores consumers gravitated to the most(fashion items) and which departments in the store consumers ignored(home furnishing). It also told them that a large flux of Asian customers frequented their store, which prompted the manager to have Asian salespeople to greet them. The data was also analyzed by using a software from RetailNext where through animation, showed managers how to change the layout of 90 stores to increase sales. These changes helped increase Gordmans’ conversion rate by 3%.

American Apparel has also adopted this ideology by using RetailNext. Stacey Shulman, technology chief of American Apparel, says she craves “the same type of analytics in-store as I can get online.” The software allowed them to tell how many customers came into the store and the time of day. Before using this forecasting method, American Apparel store managers thought they were busiest when sales peaked, when in actuality they were typically off by two hours. By using the existing cameras that are mounted above the doors as you walk in, RetailNext has been able to help American Apparel with capacity. The traffic data collected feeds into the staff scheduling software which allows the store to be able to staff accurately based on how much traffic the camera picks up.

These new innovative software’s touch on many topics we have discussed throughout our course. Both stores have used them as a means to have better forecasting data. It not only gets to track how many purchases, but look at the behaviors and characteristic of those that buy, making it easier to predict their sales. It has also allowed stores to accommodate their capacity needs by using more employees during peaks to create more sales.

As online retailers gain competitive advantage, do you think this is a good idea to boost sales in stores? By gaining more accuracy on their customers, can they win them back?

According to Investopedia.com quality management is the act of overseeing all activities and tasks to maintain a desired level of excellence. Quality management is an important part of operations management, and is one of the top priorities in a business that produces not only goods, but services. Lots of times companies encounter an issue where they have to compromise quality in order to increase profits. In our puppet class activity, we discussed the importance of having a unified quality standard. When one department thinks something may be acceptable, and the next department doesn’t let it go through then that becomes a vicious cycle of resource waste. What happens when a huge client or huge profits are on the line? In those cases this may result in ethical issues.

There are many people out there that choose the items they buy based on either the price, or the reputation of the company. It costs millions of dollars for companies to establish a reliable and trustworthy reputation; it also costs them to maintain that reputation. Eventually companies strive to increase their profit by increasing their productivity, without diminishing their quality. Productivity can be increased by perfecting the process by which the product is produced, or being able to obtain cheaper raw materials.

What happens to companies that have a wide breadth of products? We would hope that a company with a good reputation would make sure each and every one of their products is maintaining its quality; unfortunately that is not always the case. Let’s take a look at a company that is widely respected, with a huge range of products.

Lancôme is one of those companies that has a wide breadth products. Although it’s all cosmetics, they range from face wash to eye shadows, to lipsticks. For the past couple of years I have been a huge fan of their voluminous mascara, and have suggested it to all of my friends. No matter how many new types of mascara Lancôme came out with, or other companies came out with; I never felt the need to make a change.

After a couple years of using that mascara, I felt it wasn’t doing the job quite the same. At first I thought it might have been a while that I had it, and it might have dried up. After I bought a couple more, I realized that the mascara was simply not the same. It looked the same, and was at the same price point, but it seemed that the quality had diminished. I don’t know if it was just the color or type I was buying, but I was no longer happy with the results.

I was very disappointed, and had to go through a few new ones to find one that I liked. I guess that’s what happens as new items are released by a company; more resources are put towards those products, and the old ones become less relevant. On the other hand, the voluminous mascara is part of the cheaper line of products within the company. The low cost of the product might make it a little more difficult to maintain the quality when compared to their higher end products.

Do you guys think that companies with a more narrow scope of products tend to maintain quality a little better?

Is cost a direct reflection of the quality, even if it’s produced by a highly respected company?